Steel Reports 1st-quarter Loss Of $62.1 Million

April 24, 1985|by PAUL WIRTH, The Morning Call

First-quarter 1985 results, released at the start of its annual meeting yesterday, showed that Bethlehem Steel Corp. lost $62.1 million, the second significant quarterly loss in a row and a continuation of the company's dismal performance over the past three years.

Company shareholders, feeling the pain of three straight money-losing years and three reductions in their stock dividend, yesterday raked Chairman Donald Trautlein over the corporate coals.

The meeting, normally dispensed with in an hour or less, stretched to 2 1/ 2 hours as one shareholder after another raised questions about the performance of the company and its management.

Trautlein blamed high levels of imports and low steel prices for the loss. He said the second quarter probably will be "marginally profitable," but the outlook for the rest of the year is uncertain.

The chief executive said the company's fate depends in part on how well the government limits imports. The effects of President Reagan's voluntary restraint program, which so far has the support of nine countries which export steel to the United States, will be known later in the year, Trautlein said.

Responding to reporters' questions after the meeting, Trautlein acknowledged that the sometimes stormy session was the most flak he had ever taken at a shareholders' meeting. "It reflects three years of losses and the dividend cuts," he said. "I didn't expect that it was going to be a tea party."

Shareholders overwhelmingly authorized the company to issue new common and preference stock if necessary, but not before some pointed criticism from the floor. "This proposal would give a blank check to management" to issue stock without further shareholder approval, complained Richard Ash of Philadelphia. "That's absurd."

"The existing management has not shown itself competent to handle the existing shares," said another stockholder. "They should not be allowed to play with more people's money."

The proposals increase the authorized shares of common stock to 150 million from 70 million and authorize 20 million shares of a new class of preference stock.

With the bankruptcy of the Wheeling-Pittsburgh Steel Co. fresh in their minds, shareholders raised the question of continuing losses. "Some money has to be made somewhere," said Charles Ryan of Vincentown, N.J. "We can't go on like this forever."

Pointing to a 16 percent increase in Trautlein's salary in 1984 compared to 1983, Luther Kemmerer of Pleasant Valley accused the board of "rewarding someone for a non-productive year." Trautlein acknowledged that he had gotten a raise, but said his 1984 pay still was more than 12 percent below the 1981 level, before he took a pay cut.

Trautlein was asked when he thinks the new labor agreement and cost efficiencies in place at the company's Bar, Rod and Wire Division in Johnstown, Cambria County, will make it profitable. "I wish I could tell you when any of our facilities will return to profitability," he said, "including the Bethlehem plant."

Trautlein said he believes a fundamental shift in the steel business may be underway. "This business cycle has been very different than anything we have been through," he said. Capital and construction markets served by the Bethlehem plant, which normally pick up about nine months after the consumer and automotive markets, have failed to respond, he said.

That doesn't necessarily mean the future of the Bethlehem plant is in doubt, he said. There will always be a need for steel for construction, and the plant is one of the few places in the country where the heavy structural shapes can be made, he said.

A proposal to restore pre-emptive rights, which would give current shareholders first crack at any new stock offerings, was defeated. The proposal was made by John and Lewis Gilbert of New York, self-proclaimed shareholder rights activists who travel the country attending annual meetings and keeping management on their toes.

The first-quarter loss of $62.1 million translates to $1.45 per share, from sales of $1.2 billion. In the first quarter of 1984, the company lost $54.6 million, or $1.30 a share on sales of $1.3 billion.

The company's basic steel and fabricating segments lost money in the quarter, but Kusan, the toy and house-siding subsidiary, and the marine construction division were profitable, Trautlein said.

The company shipped 2,190,000 tons of steel in the first three months of 1985, compared to shipments of 2,370,000 the year before. Capacity utilization, the measure of what portion of the company's plants operated, stood at 58.6 percent during the 1985 quarter, compared to 71.1 percent the year before.